Later this week, heavyweight US lender Goldman Sachs, headquartered in New York City, had slashed its year-end 2022 projection for Wall Street bellwether S&P 500 by nearly 16 per cent or 3,600 points, as the US Fed had shown little sign to slow down its aggressive rate-hike cycle.
According to analysts at Goldman Sachs, the lender was expecting that the US Fed would likely to raise its benchmark borrowing costs above its previous estimate. In the matter of the fact, following Wednesday’s policy meet, the US Fed had announced a 75 bps (basis percentage points) rate hike, while the US Fed Chair Jerome Powell was quoted saying in a post-meet press conference that the US labour market would witness a weakness over second half of the year and US housing market might enter a correction territory, sending shockwaves across US money markets.
Adding further holocausts, the US Fed said in a statement that the US economy would only grow by 0.2 per cent this year, stoking frets of a recession in the wake of an unyielding US Fed that appears to be trying to bring down a blistering inflation surge in expense of growth.
Goldman Sachs downsizes S&P 500 growth forecast for 2022
On top of that, Goldman Sachs analysts David Kostin wrote in a client note that a soft landing for the US economy might not be possible at this standpoint as the US Fed seems to have turned rouge.
Kostin added, “Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for that outlook.
Most portfolio managers believe that in order to corral inflation the Fed will have to hike rates sufficiently high that it will result in a U.S. recession at some point during 2023”.